PRIVATE PORTFOLIO MANAGEMENT

At Hemisphere, our investment strategy is rooted in clarity, discipline, and active management. We make informed decisions based on our analysis of macroeconomic developments, long-term investment themes, and the evolving impact of these forces on specific sectors and industries within the capital markets.

We are focused on steady, long-term returns through proven asset classes. Our portfolios are built using individual publicly traded securities — including common stocks, bonds, and preferred shares. We believe these instruments provide transparency, liquidity, and the ability to manage risk more effectively than complex or illiquid alternatives.

While some other financial institutions incorporate alternative asset types such as private real estate or infrastructure, we view these as unsuitable for many investors. These investments are often accessed through mutual funds or other managed products that can involve unclear valuation methods, high fees, and restrictive sale terms. This lack of transparency can introduce unnecessary risks, including unexpected losses or illiquidity — risks we actively try to mitigate.

Our philosophy emphasizes simplicity and flexibility — investing in what we can understand and clearly explain.

At Hemisphere, tax efficiency is a core component of how we build and manage portfolios. We understand that taxes can significantly impact long-term returns, which is why we take a proactive, deliberate approach to minimizing the tax burden across your portfolio.

The use of individual securities instead of mutual funds offers several advantages when it comes to taxes:

• No embedded capital gains: Unlike mutual funds, which may carry unrealized gains from past holdings, individual securities allow you to avoid inheriting someone else’s tax liability. 

• No mandatory annual distributions: With mutual funds, there is typically an annual distribution that is not controlled by the investor. This can result in an unwanted tax burden, particularly if you buy a mutual fund near the end of the year. 

• Full control over timing: We control when to realize gains or losses, allowing for more effective planning and flexibility.

We manage portfolios at both the overall portfolio level and the account level, always with after-tax outcomes in mind. This includes thoughtful asset location — matching the right types of investments to the right types of accounts while considering the risk levels identified in your IPS:

• Taxable accounts: When possible, we emphasize capital gains and eligible dividends, which are taxed more favourably than interest income. From a fixed income standpoint, preferred shares are beneficial here as they pay dividends and not interest income.

• Registered Accounts (RRSPs, RRIFs, etc.):  If taxable accounts exist, registered accounts are typically more suitable for income-focused investments, such as bonds or higher dividend-paying stocks, because all investment income is tax-deferred and will be taxed at your marginal rate upon withdrawal. This makes registered accounts an ideal place to hold assets that generate regular taxable income. 

• TFSAs: TFSAs offer tax-free growth and withdrawals, making them a powerful vehicle for building wealth over time. However, because contribution room is limited, pursuing growth at all costs within a TFSA can carry unique risks. Large losses in a TFSA mean permanent loss of contribution room and these losses cannot be used to offset gains like in a taxable account. For this reason, we advocate for a balanced approach in TFSAs — combining growth-oriented investments with stable, income-generating assets — to help minimize the likelihood of significant losses while still benefiting from tax-free compounding.

Our approach also includes several other targeted tax strategies:

• Tax-loss harvesting: Taxable gains can be postponed to avoid an unwanted tax burden by deferring the sale of a security. Any losses can also be harvested to offset high taxable gains in a given year. By controlling the timing of purchases and sales, we can work with you to minimize tax impacts.

• Avoiding foreign dividends in TFSAs: Foreign dividends do not receive the dividend tax credit and may be subject to withholding taxes, so we avoid placing them in TFSAs to preserve tax efficiency.

• Buying discount bonds in taxable accounts: Discount bonds produce more of their return as capital gains rather than interest and can be well suited for taxable accounts.

• Donor-Advised Funds (DAF): Individual securities that have performed well over a long period and have a large unrealized gain may also become prime candidates for donating to a Donor-Advised Fund.  By donating a security with an unrealized gain, you can avoid paying tax on the capital gains while also enjoying tax benefits from the donation

By integrating tax planning into every stage of the investment process and aligning it with your overall financial goals, our financial advisors in Calgary help ensure your portfolio is structured to grow efficiently.